Critics of the marginal productivity theory of income distribution claim that the theory is flawed due to:
A. The law of diminishing returns
B. The existence of imperfect competition, such as of monopoly and monopsony, in output and resource markets
C. The problem of comparing different kinds of resources, such as capital and labor
D. Government policies which redistribute income
B. The existence of imperfect competition, such as of monopoly and monopsony, in output and resource markets
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The tax multiplier equals the change in ________ divided by the change in ________
A) consumption spending; taxes B) taxes; consumption spending C) taxes; equilibrium real GDP D) equilibrium real GDP; taxes
Refer to Scenario 16.1. Initially Sam and Sally are allocated 10 cheese doodles and 10 pretzels each. Which of the following statements are TRUE?
A) The initial allocation is Pareto optimal as it is equitable. B) The initial allocation is Pareto optimal as Sally and Sam have equal amounts of both goods. C) The allocation is not Pareto optimal. An allocation that gave Sam all of the cheese doodles and Sally all of the pretzels would make both of them better off. D) The allocation is not Pareto optimal. An allocation that gave Sam four of the cheese doodles and sixteen of the pretzels (leaving Sally the rest) would make both of them better off.